International Media Watch of news headlines and current affairs reports about Romania

Tuesday, May 18, 2010

Romania Q1 C/A gap widens, FDI halves

BUCHAREST, May 17 (Reuters) - Romania's current account deficit widened 65.5 percent year-on-year to 1.5 billion euros ($1.9 billion) in the first three months of the year, hit by lower remittances from workers abroad.

Data on Monday also showed foreign direct investment in Romania, much needed to boost the recession-hit economy, halved.

Analysts say troubles in Greece, whose lending in central and eastern Europe is concentrated mainly in Romania and Bulgaria, may also mean more stagnation on the horizon for the European Union's poorest, consumption-based economies.

Bulgaria, which like neighbouring Romania remained in recession in the first quarter, is expected to release January-March external shortfall figures at around 0900 GMT.

Data showed badly needed FDI in Romania fell to 754 million euros compared with 1.48 billion euros in January-March of last year.

Analysts say investors' appetite to invest in Romania has been falling mostly due to uncertainty over the government's ability to finance a ballooning budget deficit and lack of money for infrastructure spending.

About 650 million euros of total FDI represented equity stakes, while 104 million euros represented loans between the parent companies and their resident branches.

Current transfers, which analysts say represent mostly remittances from Romanians working abroad, fell by 63 percent, reflecting pressures on euro zone countries to cut their large pile of debt.

One in ten Romanians have gone to work abroad in recent years, mostly to Spain and Italy, countries which are under pressure to introduce austerity measures to reduce debt. This has reflected in lower wages and higher unemployment.

The external shortfall, once Romania's main vulnerability and reason to seek aid from the International Monetary Fund, narrowed significantly last year as the economy contracted by 7.1 percent.